> Opportunities For Local Providers To Hotels

Opportunities For Local Providers To Hotels

Is there an article to be had on the opportunities for local providers to hotels? Interior decorators, IT companies, furniture providers, etc.? Are they competing with international providers? Especially in regards to big chains?

Some 270 hotels with almost 50,000 rooms are in the hotel chains’ development pipelines, as reported in Ai [DATE].  Using an average of say US$200,000 per room to build, that’s US$10 billion of development cost, a significant figure by anyone’s standards!

The trouble is, a large proportion of that sum will be spent outside of Africa.  We call it “leakage” in tourism industry parlance, others call it a crying shame, a lost opportunity for Africa.  We laud hotels and other tourism establishments for creating jobs, more so in some countries than any other economic activity, but we are typically referring to the jobs in operations, not in the planning and development phase.

Countries like South Africa, Kenya, Egypt and the other “mature” economies are different.  They have, to a large extent, the professional skills (architects, engineers etc.), the contractors, the cement and the manufactured products with which to build.  And they can deliver the product quality that is demanded by the international hotel chains.  Most other countries, including Nigeria, with the largest development pipeline in Africa, cannot.

When developing a hotel at the highest level, say a Four Seasons or St Regis, the owner of the brand will demand that the owner’s professional team is pre-approved by them, often providing a shortlist of architects and others from which the owner must select.  This requirement is written in to the signed agreements, as is the brand’s approval of the contractor, and of the products selected.  Four Seasons go so far as to insist that they do all the procurement themselves!

Of course, if you want Four Seasons (Hilton, Sheraton, Marriott…..) to manage your hotel, then you must build them a Four Seasons (Hilton……).

Which is perfectly reasonable, any brand in any sector will demand that their specifications are strictly adhered to, whether it is building a hotel, making Coca Cola or producing clothing for Zara.

But whilst the majority of the workforce can be sourced locally, all too often the specialist inputs are just not there.  Why should they be?!  Why should a country like Ghana, which has built its

wealth since independence mainly on gold and cocoa, and which is experiencing a hotel development boom, have a highly specialised expertise in one sector, just because Four Seasons might come along one day?!

Well, two reasons, first to prevent leakage of millions of dollars of professional fees from their economy, and second to export that skill to other countries in Africa, even beyond.

As in all things, South Africa can be regarded as different, and the expertise for hotel development (and operations) has indeed evolved there, hence the involvement of South African architects, interior designers and others in hotel projects throughout the continent, mostly in the English-speaking countries.  But within the rest of Africa, we see very little “cross-border” involvement, so the architects on hotel projects tend to be from South Africa, the UK, the USA and China, instead of from Nigeria, Ghana or Cote d’Ivoire.

Speaking of China, the growing presence of Chinese contractors is very evident, not only because of their competitive pricing, but also because they bring highly attractive financing to projects.  But that comes with a cost, further leakage, in terms of the requirement that some 50 per cent of the labour is sourced from China, a morally-questionable demand given the need to create jobs for the rapidly-expanding African workforce.

The solution, in my experience, is professional partnerships, local firms partnering with foreign practices to the benefit of both.  The local firm brings its knowledge of the city where the hotel is to be built, including of local planning regulations and relationships with the planning officers.  In some jurisdictions, only a locally-registered practice can apply for planning permission, so in those cases it is compulsory for a foreign firm to work with a local practice.  And the local firm benefits from the transfer of knowledge, specific to the project as well as global best practice.  For the foreign firm, the local knowledge is essential (I have seen designs from foreign architects which are “unbuildable”, because they didn’t seek out the basic information about setbacks, plot density and other requirements), plus the local firm is a source of lower-cost inputs for draughting and the like – and they get a locally-based marketing department, keen to sell their services!

The lack of locally-manufactured products, from cement and steel to furniture and paint, is a more difficult issue to address, in order to reduce leakages.  I say “reduce” because it is impossible to source everything in one single country, when a deluxe hotel requires tens of thousands of different inputs.

Nigeria’s Dangote Group is tackling the cement supply, opening factories in several locations around Africa, the latest in Tanzania and Ethiopia.  Manufactured, finished products are more difficult, with a lack of electricity and unfavourable exchange rates two of the primary causes of higher prices for locally-sourced goods than for imported ones.  Grants are available for the cost of switching to cheaper, renewable sources of energy, and aid funding can sponsor the

development of partnerships between African and non-African firms for the transfer of knowledge to improve the quality of locally-manufactured goods.

None of this is going to solve the problems of sourcing inputs for the development of hotels today, tomorrow or in the near future – but they are (baby) steps in the right direction.

There’s another part to the solution, and that is changing attitudes, be it on the part of the owners, the hotel chains and of the guests themselves.

Is a guest in a hotel in Africa, let’s say in Lagos, so much impressed by the fact that the plate in the restaurant is from a well-known German manufacturer?  More impressed than if it was locally-made, or from South Africa?  Does the guest even care that much (“I’m not going back to eat there, they have African-made plates!”)?  I don’t think “going local” would be such a bad thing, and may even gain kudos for the hotel as guests understand more about the benefits of supporting the local economy.

I know, Nigeria’s manufacturing industry isn’t in any fit state to be producing hotel-quality tableware in large quantities, not yet, anyway.  But South Africa does, and Made in Africa is surely a good thing?

Each new hotel development, every refurbishment, brings so many opportunities for local, African suppliers, but with the exception of South Africa and a very few others, I think entrepreneurs are missing a trick, not gearing up to supply the industry with quality products.  As countries such as Nigeria and other mono-sectoral economies seek to diversify, it would be great if governments could encourage import-substitution businesses focusing on the quality end of the market.

Trevor Ward

W Hospitality Group, Lagos



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